Huntsman persists in trying to complete Hexion deal

Huntsman won't take no for an answerChemical giant willing to extend deadline to get deal with Hexion

BRETT CLANTON, Copyright 2008 Houston Chronicle

Published 5:30 am, Tuesday, July 1, 2008

Photo: David Hopper, For The Chronicle

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Peter Huntsman, President of the Huntsman Corporation.

Peter Huntsman, President of the Huntsman Corporation.

Photo: David Hopper, For The Chronicle

Huntsman persists in trying to complete Hexion deal

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Chemical giant Huntsman Corp. still wants to complete a merger with Hexion Specialty Chemicals despite its partner's doubts and may extend the deadline for closing the deal if needed, Huntsman's top executive said Monday.

The merger should go forward even if Hexion has difficulty arranging financing for the takeover, CEO Peter Huntsman said in a letter to Hexion Chief Executive Craig Morrison and Joshua Harris, partner with Apollo Management, the private equity fund that owns Hexion.

The letter is the latest word in a public battle between the two companies, which has escalated since Columbus, Ohio-based Hexion said in late June it was pulling its $28-a-share offer for Salt Lake City-based Huntsman, which has administrative offices in The Woodlands.

Hexion said it wanted out of the deal because Huntsman's recent poor financial performance, mounting debt and uncertain prospects could lead the combined company to insolvency.

Hexion sued Huntsman on June 19 in Delaware court to terminate the deal. A few days later, Huntsman filed suit in Texas court against Hexion and two Apollo partners, seeking $3 billion in damages.

"We expect fundamental headwinds to persist through 2009, at least," he said Monday in a note to investors.

Yet Huntsman has said it is raising prices and taking other steps to offset costs and expects its financial performance to improve in coming months.

The Hexion-Huntsman deal, valued a year ago at nearly $11 billion including debt, was supposed to create a company with sales of $14 billion and more than 21,000 workers at 180 sites worldwide, making it one of the biggest chemical companies in the world.

But Hexion said an internal study confirmed the deal no longer makes sense and suggested banks backing the deal also had doubts.

A Hexion spokesman declined to comment Monday.

Huntsman, however, said Monday that banks that had agreed to finance the deal have not "publicly declared any intention not to fund their commitments."

What's more, he said, Huntsman and Hexion had "unambiguously agreed" in the initial merger pact that Hexion's ability to secure financing for the deal would not be a condition of the merger closing.

Late Monday, New York-based hedge fund D.E. Shaw & Co. said it will try to save the Huntsman-Hexion deal.

The firm will "actively pursue a resolution" of the dispute between the companies, D.E. Shaw said in a filing with the U.S. Securities and Exchange Commission, according to Bloomberg News.

D.E. Shaw, which owns 21.7 million Huntsman shares, is working to shore up its investment after Huntsman's stock fell in recent weeks as the Hexion deal unraveled.

The firm will try to resolve the impasse by holding talks with a range of interested parties, possibly including Huntsman's board and management, Apollo, Hexion and other Huntsman shareholders, Bloomberg reported.

Huntsman appears open to the entrance of the fund into the discussions.

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"D.E. Shaw is a large shareholder, and we welcome their input," Huntsman spokesman Russ Stolle said.